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Experts call for law on unclaimed assets

FINANCIAL STANDARD
By | March 8th 2011

By Jackson Okoth

Financial sector experts have called for the introduction of unclaimed property law in Kenya.

Although the total value of unclaimed assets at the Central Depository and Settlement Corporation (CDSC) is unknown, 26 companies at the bourse reported three years ago that they were holding some Sh1.5 billion in unclaimed dividends.

Corporate action

Chief Executive of Unclaimed Property Assets Register (UPAR) Joe K Ngigi, told Financial Journal the value reported at the time did not include share scripts, bonuses or unclaimed value due to corporate action such as mergers, restructuring or acquisitions.

Currently, there is no standard procedure for accessing unclaimed assets, or even protecting shareholder value and rights in matters of unclaimed dividends.

But expectations are high that the Unclaimed Financial Assets Bill, now a notice of motion before Parliament, will finally become law.

"That way, a substantial portion of the issues revolving around unclaimed financial assets will be addressed, says Ngigi.

Ms Kerry Ann Makatiani, General Manager, Custody & Registrar Services says the problem of unclaimed financial assets is more than the making of Central Depository and Settlement Corporation (CDSC).

"One of the causes of unclaimed dividends is the issue of incomplete details provided, especially by older registers," she said.

Custody & Registrars Services Ltd manages the registrars of 18 of the 55 listed firms at the Nairobi Stock Exchange (NSE).

Also, if a shareholder’s details such as address or banking mandates are not up-to-date, the result is returned cheques or incomplete Electronic Funds Transfers (EFTs) transaction, which present reconciliation challenges for registrars.

Dormant accounts

Dormant CDS accounts and unclaimed dividends remain a matter of concern to key players in the capital market.

"For shareholders affected, the unclaimed dividends keep on accumulating with each passing dividend payment," said Ms Makatiani.

Custody & Registrars has introduced SharePower, a product that allows shareholders to query and access their records, including dividend payment history, using mobile or online access.

"The platform provides shareholders with the information to engage the registrar in the event of incorrect details or outstanding dividends," said Ms Makatiani.

As the NSE moves towards full demutualisation, the need for the bourse to develop a policy on dormant CDS accounts has been growing.

This includes measures to safeguard interests of investors who trade infrequently by identifying such accounts after a particular duration of non-activity as dormant accounts.

There is also need to formulate rules to apply if such accounts are to be reactivated.

This is to safeguard such investors from unauthorised access, providing the much-needed investor confidence even to those not actively engaged in the market.

Capacity to track

At the moment, dormant accounts present significant challenges to the market regulator.

This includes having a supervisory staff trained to monitor the accumulation and embezzlement of unclaimed assets.

It is still unclear whether the regulator has the capacity to track and monitor unclaimed assets to ensure no pilferage of capital gains or dividends.

"The lack of answers to some of these issues indicate an urgent need to have the matter of unclaimed assets at the NSE addressed," said Ngigi.

"Passage of time almost always results in significant asset gain, but also complexities in establishing genuine beneficiaries of such assets in case records are misplaced or lost."

While dormant accounts exist at the NSE and have been a target for unscrupulous stockbrokers and investment bankers, close surveillance and public reporting is seen as a critical step in fighting this malpractice.

Further, transfer of these monies in the case of permanent separation from owners would extinguish liability of the holding institution.

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